Incentivizing Healthy Behavior in State Employees Through Wellness Programs

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Incentivizing Healthy Behavior in

State Employees Through Wellness Programs

Prepared by: Liz Hendrix

Master of Public Policy Candidate

The Sanford School of Public Policy

Duke University

Faculty Advisor: Anna Gassman-Pines, PhD.

April 16, 2015

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EXECUTIVE SUMMARY

Research Summary

Over the past ten years, states have increasingly started to implement wellness

programs for state employees as a way to curb rising healthcare costs and the growing

prevalence of chronic conditions. Many states are offering incentives as part of their

wellness programs to motivate healthier behaviors and improve overall health outcomes

for state employees. This Master’s Project examines the different types of incentives and

disincentives that states are providing through wellness programs and considers the effects

that these programs may be having on state employee health and wellness.

Research and Methods

This Master’s Project uses a qualitative approach to assess the different types of

incentives and disincentives that states are implementing as a means to positively change

employee health habits. It also summarizes the results that different states have seen thus

far in terms of employee health and healthcare savings. To address these goals, I first

collected information on every state’s wellness program through individual state wellness

websites and articles detailing state wellness programs online. Second, I conducted

interviews with Wellness Coordinators and directors from 11 states to see how these states

chose to implement their wellness programs and incentives, what they hoped to achieve,

and any results that they had seen thus far. When reviewing each state’s program, I

collected information on the department that managed the state’s wellness program, the

eligibility requirements for participating in the program, and the types of incentives and

disincentives that the program offered to state employees.

Analysis and Results

Currently, 36 states use an incentives-only based program to motivate state

employees to improve their health. These states provide incentives in the form of cash and

material rewards, reduced benefits payments, ability to enroll in a lower premium health

plan, reimbursement to a Health Savings Account (HSA) or Health Reimbursement

Arrangement (HRA), days off of work, a reduction in the percentage paid into a health

benefits plan, and discounted and compensated prescription drugs. Only 5 states also use

penalties as disincentives, in addition to offering incentives, as a way to change employee

health habits. Of these states, Alabama, Maryland and North Carolina employ an

outcomes-based program model, which penalizes state employees who do not reduce their

risk numbers in four chronic health areas. The other two states, Connecticut and Oregon,

do not target specific risk factors, but penalize employees for not participating in certain

healthy activities as part of the state’s wellness program.

While many states have projected financial savings as a result of their wellness

program, only a few states have quantitative data on the success of their program. Based on

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information from interviews, some of the early results from states that offer

incentives-only based programs include higher rates of employees participating in the state wellness

program; higher rates of screenings and early diagnosis of chronic conditions; reductions

in state spending on health care and pharmacy claims; and increases in fruit and vegetable

consumption. While these results are very positive and have the effect of motivating

employees to take preventive steps to improve their health, none of these programs were

successful at changing actual health outcomes or reducing risk factors. On the contrary,

preliminary results from states that also use disincentives in addition to incentives reported

lower rates of cigarette smoking, decreased rates of obesity, and improvements in blood

pressure, cholesterol and glucose numbers.

Recommendations

• States that are interested in implementing a wellness program with an

outcomes-based approach should offer some type of disincentive for employees along with an

incentive

• For best results, wellness programs should offer immediate rewards periodically to

employees for taking positive health actions rather than promising a one-time

reward in the future. Furthermore, smaller, immediate, and frequent incentives are

influential only in the short run and should be accompanied with the additional

threat of a penalty to produce long-term behavioral change.

• States should consider framing disincentives as incentives to improve participation

rates in a wellness program. For example: raising premium rates for all employees

but allowing employees participating in the wellness program to pay the normal

premium amount disguises a penalty as a reward for taking health actions.

• States should hire wellness experts to educate and inform state employees about the

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INTRODUCTION

The burden of chronic disease in the United States continues to expand as almost

half of all Americans today are living with one or more chronic conditions (Rula and

Sacks, 2009). This growing population translates into higher health care costs for

employees and employers, as well as lower productivity at work and less time spent at

work for unhealthy employees (Rula and Sacks, 2009). As a result, states across the

country are implementing health and wellness programs based on a system of rewards and

penalties. These programs are intended to incentivize employees to engage in healthier

behaviors and to be more conscious of their lifestyle choices. The goal of such programs is

to save money on health care costs and to improve employee health.

BACKGROUND ON THE GROWING CHRONIC DISEASE CRISIS

The rising prevalence of chronic conditions in the United States and the resulting

high rates of medical costs attributed to these preventable conditions have been well

documented in recent years (Finkelstein et al., 2010). Currently, more than 75 percent of

health care spending in the U.S. goes towards covering people with chronic health

conditions (Centers for Disease Control and Prevention, 2009). According to a study by

RAND Health, in 2005, one out of every two Americans qualified as having a chronic

health illness (Centers for Disease Control and Prevention, 2009). Many of these chronic

conditions, such as heart disease, cancer, stroke, diabetes and respiratory diseases, are

preventable and are linked to related conditions such as obesity and tobacco use.

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As the crisis of obesity and other chronic health issues continues to rise in the U.S.,

medical experts and policy makers have begun to look for solutions based on preventive

measures. These measures are aimed at reducing the prevalence of harmful lifestyle

choices including unhealthy eating habits, lack of physical activity, and tobacco use. These

behaviors contribute to preventable chronic health conditions and can threaten the

wellbeing of many working Americans who are less productive at work, are absent more

often due to illness, and have worse overall health (CBIA, 2014). Such a costly and

increasingly dire crisis has encouraged companies and businesses to invest in wellness

programs to encourage healthier lifestyles for employees as a way to eliminate risk factors

that eventually lead to chronic disease.

Individual states have recently taken the initiative to improve public employee

health after the publication of several studies on state employee health risks and costs. In a

2010 study, public sector employees reported a higher prevalence of every tracked chronic

condition than private sector employees (Truven Health Analytics, 2013). Not only are

public employees at high risk for chronic conditions, but they are also among the largest

groups of employees in the U.S. (Truven Health Analytics, 2013). As such, public

employees generate some of the highest costs for state governments and taxpayers who

must support the sizeable healthcare expenditures associated with these conditions. States

have only recently begun to look for solutions to reduce escalating healthcare costs. One

solution that many states have begun to explore is the implementation of state-run wellness

programs.

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LITERATURE REVIEW

OBESITY AND TOBACCO USE

Over the past several decades, obesity rates in the U.S. have steadily increased for

adults and children, reaching proportions large enough to be considered an epidemic. In

1990, only 15 percent of the U.S. adult population was considered obese, but by 2010, 36

states had obesity rates of 25 percent or higher, and 12 of those had rates higher than 30

percent (“An Epidemic of Obesity”, 2010). In the U.S., around 300,000 deaths per year are

directly related to obesity, and for patients with a body mass index (BMI) over 40, life

expectancy is reduced by 20 years for men and at least by 5 for women (Balentine, 2012).

These statistics are even more staggering when considering the fact that obesity

also increases the risk of developing many chronic diseases that are dangerous and

significantly decrease life span. Some of these diseases include Type 2 diabetes, high

blood pressure, high cholesterol, stroke, heart attack, congestive heart failure, heart

disease, and cancer. Obesity has also been linked to less immediately dangerous

consequences such as arthritis, kidney stones, depression and erectile dysfunction

(“Obesity in America”, 2012).

This rise in rates of obesity largely stems from the unhealthy lifestyle choices of

poor nutrition, overconsumption and lack of physical activity. As a result, most of these

chronic conditions and diseases are preventable. However, the prevalence of these issues

has risen steadily with obesity rates in America.

In addition to obesity, tobacco use is also a very large contributor to chronic health

conditions in many Americans. Tobacco is the leading cause of preventable disease,

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disability, and death in the U.S. (Centers for Disease Control and Prevention, 2009). While

tobacco use has decreased significantly in the past 50 years, approximately 1 in 5

Americans still smoke, and every year over 400,000 people die from smoking or

secondhand smoke exposure (Centers for Disease Control and Prevention, 2009). Tobacco

causes certain cancers such as lung, throat, and mouth; chronic lung diseases such as

emphysema and bronchitis; heart disease; stroke; pregnancy-related issues and many others

(U.S. Department of Public Health, 2014). Tobacco and smoking related health care costs

Americans approximately $90 billion every year. As a lifestyle choice with few to no

benefits, tobacco use is the single most avoidable cause of death and disease in the United

States (Centers for Disease Control and Prevention, 2009).

CONCERNS FOR EMPLOYERS

Obesity, as well as many associated chronic conditions, has become an increasingly

expensive problem for health care providers and taxpayers who are expected to cover the

rising costs of providing health insurance to overweight and obese employees. Current cost

projections predict that adult obesity has increased current annual medical expenses by

$147 billion to a total of $210 billion per year for all taxpayers (CBIA, 2014).

In addition to the direct costs incurred by taxpayers and employers, mounting

evidence shows that obese employees are less productive on the job due to pain or sickness

resulting from chronic conditions. This phenomenon has been termed ‘presenteeism.’ A

study at Duke University found that obese employees also have increased rates of

absenteeism due to injuries and illnesses associated with obesity-related health issues

(CBIA, 2013). Presenteeism and absenteeism combined cost U.S. employers an additional

$11.7 billion dollars a years compared to normal weight employees (Finkelstein et al.,

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2010). The study at Duke also found that obese employees file twice the number of

workers’ compensation claims and worked an average of 13 days less than non-obese

employees due to injury and illness (CBIA, 2014).

These concerns are especially relevant for state governments, which are among the

largest employers in the U.S. A 2013 report by Truven Health Analytics found that

government employees cost 20 percent more to insure than private workforce employees,

and that government employees have a significantly higher rate of chronic health

conditions (Truven Heath Analytics, 2013). For many states, implementing a statewide

wellness program that targets obesity, smoking, and other chronic conditions is a crucial

first step in mitigating costs for state and local governments and taxpayers in the long run.

INCENTIVES AND DISINCENTIVES

One way that employers have begun to address these rising costs is by incentivizing

healthy behaviors in employees. A variety of strategies incorporating incentives and

disincentives have become popular methods through which to change behavior, such as

rewarding employees for achieving certain heath results or penalizing employees who do

not. A recent Rand Corporation study found that “95 percent of companies plan to offer

some kind of health improvement program for their employees, and the percentage of

companies offering incentives to participate in these initiatives has increased from 57

percent in 2009 to 74 percent in 2014” (Cook, 2015). The Affordable Care Act also

promotes the use of incentives by allowing for increases in the amount of money that

employers can use to incentivize healthier behavior and outcomes through wellness

programs (Worksite Wellness and the ACA, 2014).

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Many of the concepts behind the use of incentives as a means to elicit specific

behaviors are drawn from research in behavioral economics. Behavioral economics is

concerned with how individuals make economic decisions with regard to psychological,

social, and emotional factors (Bernheim, 2008). Some of the most common types of

incentives reward employees for taking certain actions or achieving desired results. These

can include offering health insurance premium reductions, cash bonuses, gift cards, co-pay

reductions, and lottery prizes (Rula and Sacks, 2009). Alternatively, disincentives

discourage certain behaviors through penalties, which may include co-pay increases, health

insurance premium increases, benefit reductions, or salary decreases (Rula and Sacks,

2009). Some companies use both incentives and disincentives to persuade employees to

take certain health improvement actions such as completing a survey about personal health

and risk factors or getting a preventive health screening (Wieczner, 2015).

IMPACT OF INCENTIVES

Financial and non-financial incentives are two ways to target behavior in

individuals with the intent to either induce “healthy” behaviors or reduce “unhealthy”

behaviors. The Wellness Councils of America maintain that the return on investment of a

wellness program is $3 for every $1 spent (Rula and Sacks, 2009), but few studies have

directly compared the effectiveness of incentives to the effectiveness of disincentives. This

is in part due to the fact that it takes at least two to three years for any cost benefits to

become apparent after a wellness program is initiated (Hand, 2009), so it is difficult to

judge the effectiveness of programs that rely on rewards to those that also rely on

penalties.

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Despite the current lack of information regarding how rewards and penalties differ

in terms of motivating healthy behaviors, there is a considerable amount of research in the

field of behavioral economics on the effect of rewards and punishments in changing human

behaviors. Research in behavioral economics has shown that rewards given at the time of

an action are more effective than those promised at a later time, and periodic rewards are

more effective than one-time rewards (Rula and Sacks 2009). Studies also show that

providing incentives as one-time approaches, such as giving a gift card or cash reward, is

effective in the short term for simple behavioral changes, but is unlikely to change

behavior for a long period of time (Anderko et al, 2012). Economist Florian Herold found

in his research that it is cheaper to change a norm by initially rewarding people for

performing certain behaviors as a way to establish a new norm. However, the norm can

only be sustained if there is also the threat of punishment for violating the new norm

(Gwynne, 2010). Andreoni et al also propose that rewards alone are relatively ineffective,

but that rewards and the threat of a punishment complement one another to change

individual behavior (Andreoni et al, 2003). These general behavioral economics principles

can be applied when developing state wellness programs to employ the most effective

strategies that encourage healthy employee behaviors.

EVALUATING CURRENT PRACTICES IN STATE EMPLOYEE WELLNESS

The practice of using financial incentives as tools to break unhealthy habits and

encourage healthy ones has been a strategy offered for many years by private-sector

companies as a way to decrease expenses (Gray, 2014). States have only recently begun to

embrace this model with the implementation of the first state-run programs within the last

ten years. Now, as more states look for opportunities to improve state worker heath and

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reduce the costs associated with heath care expenditures, many are choosing to implement

different wellness models in the pursuit of the most cost-effective and health-focused

programs for employees. Because most of these programs are still in their nascency, there

has been relatively little effort to compile information about what each state has done to

provide wellness alternatives for its employees.

As some states continue to modify existing wellness programs and others begin to

construct their own programs, evaluation of the effectiveness of existing programs is

becoming increasingly necessary. States need to know about current, comprehensive

practices in the field of wellness so as to avoid the past mistakes of other programs and to

incorporate methods that have improved employee health and decreased health care costs.

This Master’s Project aims to collect data on the types of wellness benefits states are

offering to their employees and to analyze the different methods states are currently

employing. The goal of this project is to provide recommendations based on these findings

for how a state should structure its wellness program so as to best achieve its goals for

improving employee wellness and lowering health care expenditures.

RESEARCH AND METHODS

My research strategy for this project involved two methods of data collection. The

first method involved collecting data on each state’s public employee wellness program

through online research and the compilation of this information into a large database. The

database allowed me to compare each state’s program side-by-side in order to evaluate the

different program aspects. The second method took the form of in-depth interviews with

11 Wellness Program Coordinators and Directors from different states. These interviews

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were used to identify individual components of each state’s wellness program, compare

how states use incentives and disincentives, and report any results that states have seen

thus far on improvements to employee health and healthcare savings.

STATE EMPLOYEE WELLNESS PROGRAM DATABASE

For the first stage of my research, I created a database (see Appendix A) that

includes information on each state’s wellness and benefits program for public employees. I

found all of the information included in the table online either on state wellness program

official websites, on the websites of the state department that manages the program, or

through online articles describing the program. This information constantly changes as

states modify and update their wellness programs, and it is possible that some of the

information that I have collected is out of date or has changed since I first found it.

The database includes components of each state’s wellness program, including the

title of the program, the state department that administers it, and as many other additional

details as I could gather. I sought to include information on who is eligible for each

program, how employees, spouses, and dependents can participate in the program, what

actions need to be taken to participate, and what incentives and/or disincentives are offered

to participating employees. In some cases, I was able to report information on how a state

paid for the cost of its program and what results a state has seen since the implementation

of the program.

In cases where states did not have a centralized wellness plan, I tried to report

information about any potential wellness benefits offered to state employees. This includes

benefits offered through individual insurance companies and pilot programs in states that

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are in the beginning stages of experimenting with wellness provisions for certain state

employees.

STATE INTERVIEWS

My second form of research came from in-depth, 30-minute phone interviews with

11 state Wellness Coordinators or officials associated with the implementation of the

state’s wellness program. Ten of the states that I contacted had well established wellness

programs and offered incentives for their employees. These states included North Carolina,

Connecticut, Nebraska, Oregon, Alabama, Arkansas, Indiana, Pennsylvania, Colorado and

Washington. I chose these states because they either offered incentives or disincentives to

their employees, had been operating for many years, or had been recommended to me by

other state’s Wellness Coordinators as a model in the field of wellness. I also contacted

California to request information about its pilot program for state employees.

I

communicated with the Coordinator for the wellness program in each state or, if a state did

not have a Wellness Coordinator, someone associated with the implementation of the

state’s wellness program. I asked each Coordinator or Director questions about the

structure of his or her state’s wellness program, how the program used incentives or

disincentives to improve employee health, what results the state had seen so far, and what

challenges they encountered during implementation of the program (see Appendix B for a

list of interview questions and Appendix C for a list of the contacts interviewed).

RESULTS AND ANALYSIS

The following section highlights important aspects of different state wellness

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and state interviews. This information comes mostly from state interviews so as to make

sure that the information reported is as up-to-date and valid as possible, but it also draws

on information in the database from the most up-to-date state webpages and news sources.

INITIAL FINDINGS ON TYPES OF PROGRAMS

Based on data collected from individual state wellness program websites and

through interviews, I have found that 36

states rely on an incentives-only approach to

motivate employee wellness. Five states use both incentives and disincentives in their

wellness programs. The 9 states that are not included in the “incentives” and

“disincentives” categories above are not included because they either do not have a

state-wide wellness program, their program does not offer incentives, or they are in the

preliminary stages of creating a wellness pilot program. Texas, Florida, Nevada, and New

York are examples of states that do not have a statewide wellness program, but some of

these states offer wellness benefits through individual insurance plans. Alaska, Michigan

and Mississippi have organized programs but do not offer incentives or disincentives to

participants. Finally, California and Hawaii have created pilot wellness programs and are

currently only offering wellness benefits to a smaller group of state employees.

CHOOSING BETWEEN INCENTIVES AND DISINCENTIVES

In order to incentivize or deter specific employee behaviors, state wellness

coordinators are forced to choose between offering rewards, penalties, or some form of

both. While almost all of the interviewed states offer some form of an incentive to

encourage healthy employee behavior, they differ in terms of also offering some type of

disincentive, like a penalty, in addition to these incentives. The overwhelming reason that

State Coordinators gave for employing an incentives-only based approach is that they

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don’t want employees to feel that the program is too punitive and want to encourage

employees to participate in the program rather than feel forced into participating. State

Wellness Coordinators that chose to add disincentives to their program believe that

incentives alone are not enough to produce the desired result of changing employee

behavior, and that penalties are necessary additions in order to change behavior. For

example, Colorado is a state that uses only incentives in its wellness program. The main

reason that it’s program initiators did not choose to also introduce penalties into its

program is based on the concern that if state employees were told that they would be

penalized for not participating, employees would feel forced to participate and, in turn,

view the program negatively. Other state’s Wellness Coordinators and Directors also cited

the desire to allow employees to decide whether or not they wanted to join the program in

hopes that the program would be viewed more positively.

Connecticut, Maryland and Alabama, on the other hand, are three states with

programs that use aspects of rewards and penalties as motivators. Alabama’s program

charges employees who chose not to participate in the state’s wellness program an

additional monthly premium, as well as an extra penalty charge if they have identifiable

risk factors and do not make changes to mitigate these risks. Officials in Alabama’s

program evaluated other wellness program designs and concluded that an incentives-only

approach would not elicit the desired results for employee behavioral changes. Maryland’s

program similarly charges a premium surcharge for all employees who do not complete a

health assessment, but also singles out employees who are overweight or have a chronic

condition and charges them if they fail to follow through on recommended treatments.

Connecticut’s program uses a disincentives model but is less punitive for high-risk

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individuals; employees who do not enroll in the state’s Health Enhancement Program

(HEP) pay $100 more for their premium and a $350 deductible per person. State

Coordinators felt that they couldn’t effectively implement the program without a carrot and

a stick approach, so they chose to charge employees more for not committing

The framing of an incentive or a disincentive is very important to how employees

view a program, as disincentives can make a program appear less appealing and more

punitive. For example, Oregon initially offered a disincentive-based model in its wellness

program’s first year of operation. Employees were forced to pay a surcharge for not

completing certain health-related actions. The program was unpopular and received

negative feedback from employees who felt that it was too punitive. In an effort to make

the program more collaborative and supportive, Oregon changed its program and framed it

as an “incentives program” by providing monthly payments to employees in exchange for

taking steps to improve their health. The program still enacts penalties for employees who

do not complete these steps by a certain date, but by framing the program as an

“incentives” program, the program has seen higher rates of participation and has received

more positive feedback.

TYPES OF INCENTIVES PROVIDED

Incentives come in multiple forms and states offer many different types of

incentives to employees. These incentives include cash and gift rewards, reduced benefits

payments and percentage of income paid into a program, access to lower premium plans,

reimbursement to a HSA or HRA, days off of work, and reduced cost of drugs. The chart

below displays different types of incentives that states provide and the number of states

that provide each type of incentive.

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Incentive States Details of Incentive

Cash Rewards, Gift Cards, Gym Discounts, Material Prizes

Arizona, Arkansas, Delaware, Idaho, Illinois, Kentucky, Maine, Massachusetts, Missouri, New Jersey, New Mexico, Ohio, Oklahoma, Vermont, Virginia, West Virginia, Wisconsin,Wyoming Must compete a • Health Risk Assessment • Wellness Exam • Physical • Biometric Screening • Win points for healthy

activities

• Workshops

• Educational Seminars

Reduced Premium and Benefit

Payments Colorado, Kansas, Iowa, Louisiana, Montana, Minnesota, Rhode Island, North Dakota, Washington

Employees must complete certain wellness requirements Agree to not use tobacco during year

Employers can achieve incentive for promoting wellness to employees (North Dakota)

Lower Premium Plan Upgrade Indiana, Kentucky, Nebraska, Tennessee, South Dakota

Allow employees to upgrade into plans with lower premium rates for completing wellness activities and providing health information

Reimbursement to a HRA or HSA

Georgia, New Hampshire and Washington

Employees can earn money which is credited to an HRA or HSA

Days Off of Work Arkansas Employees can earn points which are redeemable for material prizes and up to three days off of work

Reduced Percentage Paid into Benefits

Pennsylvania State employees contribute 5% of their salary towards their benefits and are able to reduce their contribution percentage by 3% by participating in the state wellness program Discounted and Compensated

Drug Costs

South Carolina, Connecticut -SC covers the cost of certain generic drugs for employees who complete program requirements

-CT reduces the price of medications for certain chronic conditions

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It is difficult to evaluate exactly which types of incentives are the most effective at

improving employee behavior, but a few states have found some positive changes.

Arkansas’s program has recorded fewer days of employee absenteeism by offering

employees the incentive of taking 3 days off of work for participating in the state wellness

program. Similarly, state programs like South Carolina and Connecticut that provide

discounted prescriptions have seen a rise in people picking up their prescriptions from drug

stores.

TYPES OF DISINCENTIVES PROVIDED

Only five states also use penalties as disincentives for employees who do not

participate in the state wellness program or take certain actions to improve their health.

Oregon, North Carolina, Alabama, Maryland and Connecticut all provide incentives as

rewards to employees who sign up for the state wellness program and engage in certain

health activities, but also penalize employees who fail to complete these actions through

higher deductibles, premiums, and insurance payments. For Connecticut, Oregon, and

North Carolina, this includes charging employees when they fail to satisfy program

requirements such as completing screenings, a Health Risk Assessment, or physical health

actions. Alabama and Maryland increase costs for employees with chronic conditions who

do not take actions to improve their conditions. Neither state penalizes employees whose

conditions do not improve, as long as employees show that they are trying to manage their

condition. States in this category have seen more outcomes-based results in terms of

employee wellness improvements. Most of these states have reported some type of

measureable improvement in different employee behaviors, such as lower rates of tobacco

use, lower rates of obesity, and improvements in risk factor levels.

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GOALS OF WELLNESS PROGRAMS

Most state Wellness Coordinators and Directors listed during interviews fairly

similar reasons as to why they decided to develop a wellness program and the goals that

they hoped to accomplish with the program. Overwhelmingly, the number one reason

Wellness Coordinators give for implementing a statewide wellness program is to improve

the health and wellbeing of the state’s public workforce. Every state Wellness Coordinator

or official interviewed mentioned employee wellness and reduction of health risks as the

primary motivations for implementing the program.

While “improving health and wellbeing” of state employees was unanimously cited

as the primary motivation for the wellness program development, raising awareness about

chronic conditions and early health actions was also mentioned as a goal by most

Coordinators during interviews. Wellness Coordinators hope that by becoming more

educated about health risks and engaged with their personal health, employees and their

spouses will take steps to continue to stay healthy and reduce their risk for chronic

conditions.

Although costs are not the primary reason for wellness program development in

any state, they are a concern and a motivator for most states. State Wellness Officials from

Connecticut and Alabama cited financial concerns and rises in health care costs during

interviews as reasons for considering a wellness program for state employees. The concern

of even greater escalations in state health care burdens motivated many of the interviewees

to implement statewide wellness programs.

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PROJECTIONS AND COST SAVINGS

Across the data from all of the interviewed states, two trends are present for almost

all states: 1) cost projections are very difficult to calculate, so very few Wellness

Coordinators were able to share with me predicted costs, and 2) for Coordinators that did

venture a prediction of costs over time, they planned to see a cost reduction in terms of

health care costs, at least after the first few years after program implementation. For

example, in Colorado, incentives are paid for by employee premiums; those employees

who don’t participate in the program pay for those who are participating. At about $1

million per year, the wellness program is projected to cost employees about $4-5 per

month. The state expects to see about a $3-6 return through reduced medical claims,

reduced worker compensation claims, and increased worker productivity. Indiana also

projects that it will reach industry norms by seeing a return of $3 for every $1 spent, which

would allow the program to pay for itself and yield a high return on investment. North

Carolina projects an initial cost of a few million dollars as a result of members being able

to lower their premiums, but predicts cost savings in future years.

For states that haven’t developed cost projections, most believe that any initial cost

will be very minimal and quickly dissipate as the state begins to see returns in the form of

reduced health care costs, claims and increased worker productivity. Oregon, for example,

doesn’t have an exact projection for how much money its program will cost, but estimates

that the costs of the incentive would be offset by the state’s tobacco surcharge.

Finally, a couple of states Wellness Officials stressed that, regardless of costs to the

state, implementing a statewide wellness program is necessary for the improvement of

employee health. Coordinators in two states, Washington and Colorado, insist that

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regardless of cost, implementing benefits through the wellness program is the right and

necessary thing to do to improve state employee health.

These projections suggest that, regardless of the type of wellness program

implemented, states expect to see at least some type of positive return on their investment

in relation to the costs associated with starting the program. Even though many states have

projected savings within just a few years of the program start, it will still be a few years

before they will be able to collect hard data on the success of their programs in terms of

improved employee health. Until then, it is difficult to predict exactly how close cost

projections will align with outcomes in reality.

PROGRAM EFFECTS ON EMPLOYEE HEALTH

Similar to predicting future cost returns for state wellness programs, it is

comparably difficult to predict the effects that each of these programs will have on

employee health. For most of the existing state wellness programs, it is still too early to see

many results in terms of altered employee health. Even for many of the programs that have

been around for over three years, the collection of quantitative data from participants has

been difficult to gather and analyze. Some of these difficulties arise from the fact that these

programs can’t legally access certain individual participant data and only have the

self-reported answers from employee Health Risk Assessments off of which to base

comparisons. Another problem that many states have encountered is that, because most

wellness programs are voluntary, there are many employees who are not participating and

therefore not providing data, making the data pool very small. Other programs that cover

participating employees, their spouses, and their dependents receive data from all three of

these groups and can’t differentiate between state employees and the other two, which

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makes it difficult to record and interpret how state employees’ health changes. Arkansas

specifically encountered the issue of having little measurable data from the program due to

the fact that many employees were using the wellness system without having taken the

required Health Risk Assessment.

Despite the difficulties of collecting quantitative data on employee outcomes and

health improvements, some states officials have been able to collect some types of

information and feedback on participating employees. Specifically, Program Coordinators

from Nebraska, Oklahoma, Connecticut, Oregon, and Alabama reported positive findings,

which varied by program type. A report published on Nebraska’s state wellness program

reported that 514 new early stage cancers have been detected and 26 new cases of late

stage cancer were diagnosed as a result of the increase in preventive screenings. It also

found a 37 percent increase in preventive screening adherence (Hunnicutt, 2012). Based on

its analysis of medical and pharmacy claims spending, it found a $4.2 million reduction in

pharmacy claim spending from the first two years of its program when comparing wellness

program participants’ health costs to non-wellness participants’ costs. The resulting return

on investment was $2.70 returned in health care savings for every $1 spent on the wellness

program (Hunnicutt, 2012). The Center for State and Local Government Excellence

evaluated Oklahoma’s wellness program and found that, after three years of operation, OK

Health participants have experienced a 21 percent decrease in medical claims, a 9 percent

reduction in hospitalizations, a 34 percent reduction in doctor’s visits and a 3 percent

decrease in emergency room visits compared with non-participants (OK Health, 2015).

(24)

While both of the preceding state programs employed incentives-only wellness

programs, Oregon introduced disincentives in addition to offering incentives and found

more outcomes-based preliminary program results. Oregon’s Public Employees’ Benefit

Board (PEBB) found some positive trends in its early results that revealed that employees

participating in the program were experiencing lower rates of cigarette smoking, lower

rates of obesity, and higher rates of cancer screenings. However, it couldn’t prove that

theses results were solely related to its Health Enrollment Model Program, as the analysis

of its results is still early and ongoing. Alabama’s Clinical Director reported that

participating employees in Alabama have experienced significant improvement in all

targeted risk factors (blood pressure, cholesterol, and glucose) except for BMI. Finally,

Connecticut’s wellness contact reported that the state saw a decline in inpatient visits to the

hospital, an initial reduction in visits to the ER, and an increase in preventive visits for men

(who in general utilize preventive health care less regularly than women).

These differences in outcomes vary by programs that use only incentives and

programs that also use disincentives. While Nebraska and Oklahoma’s results reveal

increases in program adherence and screenings, improvements in identifying chronic

conditions, and reductions in health care costs, none of the results showed improvements in

outcomes in related to sustained behavioral changes. Oregon and Alabama, in comparison,

have reported lower rates of obesity, cigarette smoking, and reductions in levels of blood

pressure, cholesterol and glucose for employees. While these initial results can only be

attributed to a very small sample of states, they do indicate that the states that have

implemented disincentives in their wellness programs have also seen outcomes-based

health results. The states that structured their programs with only incentives have reported

(25)

that their employees are taking more preventive steps to improve their health, but have not

necessarily seen improvements in the reduction of chronic conditions or risk levels. While

it is too early to make any large assumptions from these preliminary results, this may

imply that an approach that utilizes disincentives in addition to incentives may be the most

successful way to promote long-term changes in employee behavior, while an

incentives-only approach may be better at improving prevention related behaviors among employees.

More results and time are needed to more accurately test this hypothesis.

ISSUES TO IMPLEMENTATION

Throughout the process of implementing a statewide wellness program, each state

faced different types of barriers and challenges. One challenge that was common across

states was the reluctance of employees to accept the new program. Many public

employees, especially those who had been working for the state for many years, were at

first unwilling to accept changes in their health insurance and had difficulty understanding

the demands required of them to participate in the program, should they choose to join.

This confusion was also exacerbated by the large number of older state employees in

certain states like Indiana who were more reluctant to change their behaviors.

Along with state employees not entirely understanding the intent of wellness

programs, many complained that they didn’t want the government collecting private

information about their health. Multiple states, including Colorado and Connecticut,

described employee perception of the programs as “big brother” collecting employee

health information. This generated the fear that the information would be used against

employees and caused many to become reluctant to share their personal information.

Employees feared that they could lose their jobs if employers saw that they were

(26)

overweight or had a chronic condition, or that they would see changes in their life

insurance premiums based on their health information. State wellness Directors and

Coordinators faced the challenge of communicating to public employees that personal

employee health information was secure and that no one else would have access to the

information.

Another form of backlash that some states faced was from employees who felt that

their state’s wellness program represented an overstep of government authority. Alabama’s

Clinical Director reported many employees complaining that the additional $25 premium

charge to those with high risk factors was a “fat tax” that unfairly charged overweight and

high-risk employees. Alabama was the first state to use a biometric screening to charge a

premium based on risk factors and also set high baseline standards as the basis for “at risk”

status. As a result of this, the state received a high degree of scrutiny from the media and

employees for being overly punitive and potentially putting economic pressure on already

poor employees. Despite these complaints, Alabama state employees are some of the only

state employees that actually met program biometric standards and lowered their risk for

three out of four chronic conditions.

The challenge reported most often by state Wellness Coordinators was the

difficulty of communicating to all public employees throughout the state information

regarding program expectations that employees needed to satisfy in order to participate.

Colorado, for example, has a very diverse group of employees in terms of age and location

in the state and had difficulty informing employees about the wellness program. Some of

the state’s employees, such as corrections employees, did not have access to a computer, so

(27)

wellness program officials had to use alternate forms of communication than email to

reach this group. Nebraska officials faced a similar challenge of finding a way to inform its

state employees on how to enroll in the program and what was required of them once they

enrolled.

Finally, some states faced political and structural barriers during the

implementation of their programs. Nebraska’s largest challenge to implementation was a

two-year approval process that involved obtaining a buy-off from the Legislature and

Unions regarding the funding of the wellness program. In addition, state statute includes

incentive limitations, so the wellness program could not incentivize employees to change

their behavior through cash or gift incentives. Washington’s Wellness Program Director

described the inconvenience of having a very dispersed management structure in the state

and the difficulties stemming from the fact that Washington does not have one executive

leader to make all wellness decisions for the state.

FUTURE MODIFICATIONS TO PROGRAMS AND LESSONS LEARNED

Based on the interview responses, many states cited some next steps that they

would put in place in the future to improve upon their existing programs. One recurring

idea is to change the program from a participation model to an outcomes-based model.

Many of the current state programs use models in which employees are rewarded for

participating in the wellness program and for taking a Health Risk Assessment or biometric

screening. While this gives states an idea of their employees’ health profiles and activities,

it does little to motivate employees to actually change their behaviors. An outcomes-based

program, like Alabama’s and Oregon’s programs, incentivizes employees to make changes

based on their Health Risk Assessments or biometric screenings to improve their health by

(28)

decreasing their blood pressure to a certain level, losing a certain amount of weight, or

reducing their cholesterol levels.

Another necessary reform that was cited is to create a better system for claims data

to be processed. Processing claims data can take months in some states, and this can

preclude employees from receiving a wellness discount or reward on time if the state can’t

confirm their participation by the necessary deadline. Connecticut’s Assistant Director

considered a plan for the future in which employees swipe a card when they visit the

doctor and type in a code to confirm that they went in for a preventive appointment. Their

information and claims data could then be processed immediately.

Finally, hiring experts in different departments or areas of the state to present

information to employees about the state’s wellness program would allow employees to

better understand how their state’s program works. These few experts will be able to

answer questions about the wellness program and convey the reasons why states are

implementing such a program. This solution would address many of the current

confusions, misunderstandings, and accessibility issues that states have encountered in the

past.

RECOMMENDATIONS

Based on the data collected from interviews and state wellness websites, I

recommend that states intending to reduce specific chronic conditions and risk factors in

employees implement a wellness program model with both incentive and disincentive

components. Alabama, Maryland and North Carolina, Oregon and Connecticut are the only

states that currently use disincentives as a means to improve employee health behaviors.

(29)

While it is still too early to report health improvements for Maryland and North Carolina,

both Alabama and Oregon reported outcomes-based results in terms of lower rates of

obesity, blood pressure, cholesterol, and glucose levels. Connecticut also reported positive

results in the form of more people taking advantage of preventive health benefits and

picking up their prescriptions. No state that offered incentives without the addition of

disincentives reported specific reductions in biometric measurements for state employees.

Incentives-based programs have the ability to motivate employees to take

preventative steps towards improving their health. Incentives-only structured state

programs like Nebraska and Oklahoma have reported decreases in state spending on

medical and pharmacy claims as well as increases in early detection and employee

program involvement. However, no states have actually reported an improvement in

employee health outcomes without the use of penalties in addition to rewards. Based on

these findings, states should consider enacting some type of disincentive in a state wellness

program if its goal is to improve actual health outcomes and sustain changes in healthy

behavior

These finding are supported by research in behavioral economics, which posits that

accompanying an incentive with the threat of a penalty is more effective in producing

long-term behavioral change. While incentives appear to make employees more mindful of their

health and increase the likelihood of joining a wellness program, they may not influence

employee behavior enough to sustain a healthier lifestyle. As a result, states with

well-established, incentives-based wellness programs have not seen the same outcomes-based

heath results as states that have implemented penalties for unhealthy behaviors.

(30)

Framing is also important when considering how people may react to receiving an

incentive or a disincentive. Some states have experienced pushback from employees who

felt that they were being punished by having to participate in the state’s wellness program.

Framing a penalty as a reward can help improve willingness to participate in a wellness

program and increase positive feelings about the program. For example, raising premium

rates for all employees but allowing employees participating in the wellness program to

pay the normal premium amount disguises a penalty as a reward for taking health actions.

By framing some disincentives as incentives, states can expect to improve participation

rates in their wellness programs.

To overcome some of the challenges that states have faced in implementing their

wellness programs, states must find a way to convey pertinent information about the state

wellness program to all state employees. While a large visibility campaign is a good way

to provide information to a large amount of employees, it may not reach all employees or

provide answers to more sensitive questions that employees may have. A better way to

promote state wellness programs would be to hire multiple experts, either in state

government buildings or who travel to different state buildings. These experts would be

able to discuss the merits and the intricacies of the state wellness program with state

employees. This would allow employees to learn why wellness is important, what the goals

of the program are, and what the benefits of joining are for the employee and employer.

LIMITATIONS

This study had a few limitations despite my best efforts to collect salient and

(31)

state programs may be out of date or incorrect. I found differing amounts of information on

almost all 50 states first through each state’s wellness website, online articles or other state

department websites. Often, this data had not been recently updated or did not detail all

elements of the state’s wellness program. Information that I found online did not always

match the information that I was given by officials and program Coordinators during my

interviews. Therefore, it is possible that some states may have different program models or

incentives and disincentives than reported here. It was also very difficult to find all of the

necessary information on each state’s wellness program online. For many states, I had to

use multiple sources and, in some cases, I was still unable to a sufficient amount of

information detailing state wellness for public employees. There may be many more results

from state programs that I am unaware of because the data is simply not published online.

This may be a reason why very few studies have tried to catalogue current material and

best practices for state wellness programs.

Wellness programs are also very new and continuously change. During my

research, the information provided online for some states changed over the course of a few

weeks or a month. Data in my report may already be out of date since starting this project

either because programs have changed or did not originally post up-to-date program

information online.

Due to the time constraints of the project, I was only able to interview 11 out of 50

states. The information I have on these 11 states is the most accurate and up-to-date data

possible, but an ideal project would have interview information from all 50 states. This

(32)

project could be continued in the future to collect more data through interviews with the

other 39 states not interviewed in this project.

CONCLUSIONS

State-run wellness programs have gained popularity over the past ten years as most

states have seen large increases in chronic conditions in their state employees coupled with

a rise in health care costs. As more states begin to implement wellness programs, they will

need to know the most effective wellness development approaches in order to improve

employee health and decrease the costs of providing health care. This report provides an

analysis of the current parameters of existing programs and makes recommendations to

improve programs aimed at improving state employee wellness.

(33)

APPENDIX A: STATE WELLNESS PROGRAM INFORMATION

DATABASE

Alabama Alabama State Employee’ Insurance Board

• 2008 announced plan to start in 2010

• All active employees, covered spouses of active employees, non-Medicare retirees

and non-Medicare covered spouses of retirees covered under the State Employees’ Health Insurance Plan (Group 13000) are eligible for a wellness premium discount

Incentives Program:

• Charge additional $25 monthly premiums for state employees who choose not to

participate in state’s wellness program through free health screenings

• Starting in 2009, all employees have access to free screening to identify risk factors

and levels for at risk members that employees must seek to decrease. These include:

o Blood pressure systolic reading of 160 or higher or your diastolic reading of 100 or higher;

o Cholesterol reading is 250 or higher;

o Glucose reading is 200 or higher;

o Body mass index is 40 or higher.

• Employees that exceed baseline for one of these potentially costly conditions will be

given a voucher for a free follow-up with a doctor

• In order to keep the discount, employees will be required to annually certify that they

are taking steps to manage their condition, either through follow-up with a physician, participation in a wellness program, or active self-management

• Employees have one year to see a doctor at no cost, enroll in a wellness program, or

take steps on their own to improve the above risk factors

• After a year, the employee will be screened again at no cost. If there is an

improvement, there will be no cost. A penalty will be enacted if no change has occurred

• Employees whose condition does not improve will not be penalized as long as they

show good faith in trying to manage their condition through one of the steps above.

• Starting in 2010, all employees will pay $50 per month with the opportunity to have

their premium reduced to zero for healthy behaviors. For example, non-smokers will automatically have their payments reduced by $25. An additional discount of $25 will be given to employees who participate in the wellness program, including initial screening and follow-ups.

o Effective January 1, 2010, all active employees will be assessed a $25 per month premium for single coverage. This is in addition to the $25 premium SEHIP members pay monthly if they, or their covered spouse, use tobacco products

o Effective January 1, 2009, all active employees will be given the opportunity to have the $25 premium waived

http://www.gken.org/Synopses/CI_10005.pdf

http://www.alseib.org/PDF/SEHIP/SEHIPWellnessPremiumDiscount.pdf

(34)

Alaska Alaska Department of Administration Retirement and Benefits AlaskaCare Employee Wellness Program

• Offer state employees a free ad confidential Health Risk Assessment to identify

individual strengths and weaknesses and suggests actions to take to improve health

• Provides onsite individual health coaching to discuss wellness goals

• The official website offers links wellness activities in certain areas; suggests

exercises to improve health; provides monthly infographics on health-related issues; lists healthy recipes; and uploads webinars on health

http://doa.alaska.gov/drb/alaskacare/employee/wellness/

Arizona Arizona Department of Administration: Benefits Options Wellness

• Beginning October 1, 2014, Benefit Options will offer state employees the Health

Impact Program (HIP)

• HIP is a wellness enhancement program designed as an incentive based employee

wellness program for benefits eligible State of Arizona employees

• Employees will register through the Mayo Clinic Healthy Living online portal and

have access to a health assessment, health information and resources

• HIP is voluntary and open to all eligible employees (no spouses, dependents or

retirees)

• Program participants must achieve 500 total points by September 30, 2015 to be

eligible to receive up to $200; the amount may be lower depending on total participation.

• In order to be eligible for the incentive, employees must complete at least ONE

activity in each category. Categories include:

o Activity/exercise

o Preventive Screenings

o Nutrition/Other (tobacco, pregnancy, coaching, disease management)

• All activities are self reported into the online portal and participants must retain proof

of participation of reported activities

http://www.benefitoptions.az.gov/wellness/

HIP Point System:

http://benefitoptions.az.gov/wellness/Docs/2014%20HIP%20Point%20System_ver2.pdf

Arkansas Arkansas Department of Health: Arkansas Healthy Employee Lifestyle Program

• AHELP launched in 2005

• Its five stated goal for increasing the number of participants who:

(1) are at a healthy weight, (2) choose healthy food options,

(3) participate in regular physical activity,

(4) obtain annual age-appropriate doctor-recommended screenings, (5) reduce or quit their use of tobacco products

• In 2005, Arkansas State Sen. Linda Chesterfield passed Act 724, which allowed for

(1) incentives for the improvement of state employee health, (2) leave for state employees who participate in the health employee program, and (3) walking areas for the state agency facilities establishing AHELP.

• Employees that participate in AHELP are required to take a confidential Health Risk

Assessment (HRA), which evaluates diet, physical activity, other health risk factors, and readiness to make behavioral changes as a prerequisite to participate

Incentivizing Healthy Behavior in State Employees Through Wellness Programs